UT investment company's privatization questioned

Published: Monday, May 10, 1999

AUSTIN {AP} The corporate executives who invest $12.6 billion in public university money saw their pay checks fatten dramatically in three years, with some doubling what they had earned in 1996 as University of Texas System employees.

The financial reward to the money managers has come mostly in the form of a bonus given for outperforming their peers nationwide.

One executive who in 1996 made $61,200 at the UT System is making $191,992 in pay and bonuses this year at the University of Texas Investment Management Co., a private corporation created in March 1996. He is among eight UTIMCO executives who manage stocks, bonds and endowments that support the UT and Texas A&M systems.

But when performance is compared against such private-industry yardsticks as the Standard & Poor's 500, stocks in the Permanent University Fund portfolio performed below the three-year industry average.

State Sen. Bill Ratliff, chairman of the Senate Finance Committee, said compensation for state money managers is "a serious problem," the Austin American-Statesman reported in Sunday's editions.

Several other senators are urging that a panel of lawmakers review all state investment funds after the legislative session ends May 31, from salaries to fund performance, said Ratliff, a Mount Pleasant Republican.

Investment fund officials say the funds are performing better than they had before the Legislature authorized the University of Texas system to create a private corporation to manage the funds. The corporation was intended to give the company's money managers greater flexibility to respond to investment opportunities.

The investment company cited data showing its performance is now better than the average of 113 comparable college and university endowments. The higher pay reflects that stronger performance, they said.

It also reflects a desire on the part of the UTIMCO board to pay its money managers like their peers in the private and non-profit sectors, they said.